Intrinsic value of Geospace Technologies - GEOS

Previous Close

$15.00

  Intrinsic Value

$3.69

stock screener

  Rating & Target

str. sell

-75%

Previous close

$15.00

 
Intrinsic value

$3.69

 
Up/down potential

-75%

 
Rating

str. sell

*Intrinsic value change (in %) minus stock price change (in %) in the past 12 months.

We calculate the intrinsic value of GEOS stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Shares outstanding, mln

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
2017(a)
   2018
   2019
   2020
   2021
   2022
   2023
   2024
   2025
   2026
   2027
   2028
   2029
   2030
   2031
   2032
   2033
   2034
   2035
   2036
   2037
   2038
   2039
   2040
   2041
   2042
   2043
   2044
   2045
   2046
   2047

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  19.35
  50.00
  45.50
  41.45
  37.81
  34.52
  31.57
  28.91
  26.52
  24.37
  22.43
  20.69
  19.12
  17.71
  16.44
  15.29
  14.27
  13.34
  12.50
  11.75
  11.08
  10.47
  9.92
  9.43
  8.99
  8.59
  8.23
  7.91
  7.62
  7.36
  7.12
Revenue, $m
  74
  111
  162
  228
  315
  424
  557
  718
  909
  1,130
  1,384
  1,670
  1,990
  2,342
  2,727
  3,144
  3,593
  4,072
  4,581
  5,119
  5,687
  6,282
  6,905
  7,557
  8,236
  8,943
  9,679
  10,445
  11,240
  12,067
  12,926
Variable operating expenses, $m
 
  93
  135
  191
  264
  355
  467
  602
  762
  947
  1,160
  1,400
  1,667
  1,963
  2,285
  2,635
  3,011
  3,412
  3,839
  4,290
  4,765
  5,264
  5,787
  6,333
  6,902
  7,495
  8,111
  8,753
  9,419
  10,112
  10,832
Fixed operating expenses, $m
 
  70
  71
  73
  75
  77
  79
  81
  83
  85
  87
  89
  91
  94
  96
  98
  101
  103
  106
  109
  111
  114
  117
  120
  123
  126
  129
  132
  136
  139
  143
Total operating expenses, $m
  128
  163
  206
  264
  339
  432
  546
  683
  845
  1,032
  1,247
  1,489
  1,758
  2,057
  2,381
  2,733
  3,112
  3,515
  3,945
  4,399
  4,876
  5,378
  5,904
  6,453
  7,025
  7,621
  8,240
  8,885
  9,555
  10,251
  10,975
Operating income, $m
  -54
  -52
  -45
  -36
  -24
  -8
  11
  36
  64
  98
  137
  181
  231
  286
  346
  411
  481
  556
  636
  721
  810
  903
  1,002
  1,104
  1,211
  1,323
  1,439
  1,560
  1,685
  1,816
  1,951
EBITDA, $m
  -36
  -32
  -17
  4
  31
  66
  109
  162
  224
  297
  380
  475
  580
  697
  825
  963
  1,112
  1,271
  1,440
  1,620
  1,808
  2,007
  2,214
  2,431
  2,657
  2,893
  3,139
  3,394
  3,659
  3,935
  4,221
Interest expense (income), $m
  0
  0
  0
  0
  1
  1
  2
  3
  3
  4
  6
  7
  8
  10
  12
  14
  16
  18
  21
  23
  26
  29
  32
  36
  39
  43
  46
  50
  54
  58
  62
Earnings before tax, $m
  -54
  -52
  -45
  -37
  -25
  -10
  10
  33
  61
  94
  132
  175
  223
  276
  334
  397
  465
  538
  615
  697
  784
  874
  969
  1,069
  1,172
  1,280
  1,393
  1,510
  1,631
  1,758
  1,889
Tax expense, $m
  3
  0
  0
  0
  0
  0
  3
  9
  16
  25
  36
  47
  60
  74
  90
  107
  126
  145
  166
  188
  212
  236
  262
  289
  317
  346
  376
  408
  440
  475
  510
Net income, $m
  -57
  -52
  -45
  -37
  -25
  -10
  7
  24
  45
  69
  96
  127
  162
  201
  244
  290
  339
  393
  449
  509
  572
  638
  708
  780
  856
  935
  1,017
  1,102
  1,191
  1,283
  1,379

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  51
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  206
  233
  339
  479
  660
  888
  1,168
  1,506
  1,905
  2,370
  2,901
  3,502
  4,171
  4,910
  5,717
  6,591
  7,532
  8,536
  9,604
  10,732
  11,922
  13,170
  14,477
  15,842
  17,266
  18,749
  20,292
  21,897
  23,565
  25,298
  27,099
Adjusted assets (=assets-cash), $m
  155
  233
  339
  479
  660
  888
  1,168
  1,506
  1,905
  2,370
  2,901
  3,502
  4,171
  4,910
  5,717
  6,591
  7,532
  8,536
  9,604
  10,732
  11,922
  13,170
  14,477
  15,842
  17,266
  18,749
  20,292
  21,897
  23,565
  25,298
  27,099
Revenue / Adjusted assets
  0.477
  0.476
  0.478
  0.476
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
  0.477
Average production assets, $m
  65
  97
  142
  201
  276
  372
  489
  631
  798
  992
  1,215
  1,466
  1,747
  2,056
  2,394
  2,760
  3,154
  3,575
  4,022
  4,495
  4,993
  5,516
  6,063
  6,635
  7,231
  7,852
  8,499
  9,171
  9,869
  10,595
  11,349
Working capital, $m
  75
  36
  52
  74
  102
  137
  181
  233
  294
  366
  448
  541
  645
  759
  884
  1,019
  1,164
  1,319
  1,484
  1,659
  1,842
  2,035
  2,237
  2,448
  2,668
  2,898
  3,136
  3,384
  3,642
  3,910
  4,188
Total debt, $m
  0
  6
  13
  23
  36
  52
  72
  96
  124
  157
  195
  238
  285
  338
  395
  457
  524
  595
  671
  751
  835
  924
  1,017
  1,114
  1,215
  1,320
  1,430
  1,544
  1,662
  1,785
  1,913
Total liabilities, $m
  11
  17
  24
  34
  47
  63
  83
  107
  135
  168
  206
  249
  296
  349
  406
  468
  535
  606
  682
  762
  846
  935
  1,028
  1,125
  1,226
  1,331
  1,441
  1,555
  1,673
  1,796
  1,924
Total equity, $m
  195
  216
  315
  445
  613
  825
  1,085
  1,399
  1,770
  2,201
  2,695
  3,253
  3,875
  4,561
  5,311
  6,123
  6,997
  7,930
  8,922
  9,970
  11,075
  12,235
  13,449
  14,717
  16,040
  17,418
  18,852
  20,342
  21,892
  23,502
  25,175
Total liabilities and equity, $m
  206
  233
  339
  479
  660
  888
  1,168
  1,506
  1,905
  2,369
  2,901
  3,502
  4,171
  4,910
  5,717
  6,591
  7,532
  8,536
  9,604
  10,732
  11,921
  13,170
  14,477
  15,842
  17,266
  18,749
  20,293
  21,897
  23,565
  25,298
  27,099
Debt-to-equity ratio
  0.000
  0.030
  0.040
  0.050
  0.060
  0.060
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.070
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
  0.080
Adjusted equity ratio
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929
  0.929

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  -57
  -52
  -45
  -37
  -25
  -10
  7
  24
  45
  69
  96
  127
  162
  201
  244
  290
  339
  393
  449
  509
  572
  638
  708
  780
  856
  935
  1,017
  1,102
  1,191
  1,283
  1,379
Depreciation, amort., depletion, $m
  18
  19
  28
  40
  55
  74
  98
  126
  160
  198
  243
  293
  349
  411
  479
  552
  631
  715
  804
  899
  999
  1,103
  1,213
  1,327
  1,446
  1,570
  1,700
  1,834
  1,974
  2,119
  2,270
Funds from operations, $m
  36
  -32
  -17
  3
  30
  65
  105
  150
  204
  267
  339
  421
  512
  613
  723
  842
  970
  1,108
  1,254
  1,408
  1,571
  1,741
  1,920
  2,107
  2,302
  2,505
  2,716
  2,936
  3,165
  3,402
  3,649
Change in working capital, $m
  26
  12
  16
  22
  28
  35
  43
  52
  62
  72
  82
  93
  103
  114
  125
  135
  145
  155
  165
  174
  184
  193
  202
  211
  220
  229
  238
  248
  258
  268
  278
Cash from operations, $m
  10
  -44
  -33
  -18
  2
  30
  62
  98
  142
  195
  257
  328
  408
  498
  598
  707
  825
  952
  1,089
  1,233
  1,387
  1,548
  1,718
  1,896
  2,082
  2,276
  2,478
  2,688
  2,907
  3,134
  3,370
Maintenance CAPEX, $m
  0
  -13
  -19
  -28
  -40
  -55
  -74
  -98
  -126
  -160
  -198
  -243
  -293
  -349
  -411
  -479
  -552
  -631
  -715
  -804
  -899
  -999
  -1,103
  -1,213
  -1,327
  -1,446
  -1,570
  -1,700
  -1,834
  -1,974
  -2,119
New CAPEX, $m
  -2
  -32
  -44
  -59
  -76
  -95
  -117
  -141
  -167
  -194
  -223
  -251
  -280
  -309
  -338
  -366
  -394
  -421
  -447
  -473
  -498
  -523
  -547
  -572
  -596
  -621
  -646
  -672
  -698
  -726
  -754
Cash from investing activities, $m
  -5
  -45
  -63
  -87
  -116
  -150
  -191
  -239
  -293
  -354
  -421
  -494
  -573
  -658
  -749
  -845
  -946
  -1,052
  -1,162
  -1,277
  -1,397
  -1,522
  -1,650
  -1,785
  -1,923
  -2,067
  -2,216
  -2,372
  -2,532
  -2,700
  -2,873
Free cash flow, $m
  5
  -90
  -97
  -105
  -114
  -121
  -130
  -141
  -151
  -159
  -164
  -166
  -165
  -160
  -151
  -138
  -121
  -99
  -73
  -44
  -10
  27
  68
  112
  159
  208
  261
  316
  374
  434
  497
Issuance/(repayment) of debt, $m
  0
  6
  8
  10
  13
  16
  20
  24
  28
  33
  38
  43
  48
  52
  57
  62
  67
  71
  76
  80
  84
  89
  93
  97
  101
  105
  110
  114
  118
  123
  128
Issuance/(repurchase) of shares, $m
  0
  124
  144
  167
  193
  221
  253
  290
  327
  363
  398
  430
  460
  485
  506
  522
  534
  541
  543
  540
  533
  521
  507
  488
  467
  443
  417
  389
  359
  327
  294
Cash from financing (excl. dividends), $m  
  0
  130
  152
  177
  206
  237
  273
  314
  355
  396
  436
  473
  508
  537
  563
  584
  601
  612
  619
  620
  617
  610
  600
  585
  568
  548
  527
  503
  477
  450
  422
Total cash flow (excl. dividends), $m
  5
  40
  54
  72
  92
  116
  143
  172
  204
  237
  271
  306
  342
  377
  412
  446
  480
  513
  545
  576
  607
  637
  667
  697
  727
  757
  788
  819
  851
  885
  919
Retained Cash Flow (-), $m
  49
  -124
  -144
  -167
  -193
  -221
  -260
  -314
  -371
  -431
  -494
  -558
  -622
  -686
  -750
  -812
  -874
  -933
  -992
  -1,049
  -1,105
  -1,160
  -1,214
  -1,268
  -1,323
  -1,378
  -1,434
  -1,491
  -1,549
  -1,610
  -1,673
Prev. year cash balance distribution, $m
 
  51
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
 
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
 
  -33
  -90
  -95
  -101
  -105
  -117
  -141
  -167
  -194
  -223
  -251
  -280
  -309
  -338
  -366
  -394
  -421
  -447
  -473
  -498
  -523
  -547
  -572
  -596
  -621
  -646
  -672
  -698
  -726
  -754
Discount rate, %
 
  4.30
  4.52
  4.74
  4.98
  5.23
  5.49
  5.76
  6.05
  6.35
  6.67
  7.00
  7.35
  7.72
  8.11
  8.51
  8.94
  9.39
  9.86
  10.35
  10.87
  11.41
  11.98
  12.58
  13.21
  13.87
  14.56
  15.29
  16.05
  16.86
  17.70
PV of cash for distribution, $m
 
  -32
  -82
  -83
  -83
  -81
  -85
  -96
  -105
  -112
  -117
  -119
  -120
  -118
  -113
  -107
  -100
  -91
  -82
  -73
  -63
  -54
  -45
  -37
  -30
  -24
  -19
  -14
  -11
  -8
  -6
Current shareholders' claim on cash, %
  100
  54.1
  32.7
  21.5
  15.1
  11.1
  8.5
  6.8
  5.5
  4.6
  3.9
  3.4
  2.9
  2.6
  2.4
  2.2
  2.0
  1.8
  1.7
  1.6
  1.6
  1.5
  1.4
  1.4
  1.3
  1.3
  1.3
  1.2
  1.2
  1.2
  1.2

Geospace Technologies Corporation designs and manufactures instruments and equipment used by the oil and gas industry to acquire seismic data in order to locate, characterize and monitor hydrocarbon producing reservoirs. The Company also designs and manufactures non-seismic products, including industrial products, offshore cables and imaging equipment. The Company operates through two segments: Seismic and Non-Seismic. The Company's Seismic product segments include traditional exploration products, wireless exploration products and reservoir products. Its seismic product lines consist of land and marine nodal data acquisition systems, permanent land and seabed reservoir monitoring products and services, geophones and geophone strings, hydrophones, leader wire, connectors, telemetry cables, marine streamer retrieval and steering devices and various other products. The Company's Non-Seismic product segments include imaging and industrial products.

FINANCIAL RATIOS  of  Geospace Technologies (GEOS)

Valuation Ratios
P/E Ratio -3.5
Price to Sales 2.7
Price to Book 1
Price to Tangible Book
Price to Cash Flow 20.2
Price to Free Cash Flow 25.2
Growth Rates
Sales Growth Rate 19.4%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate 0%
Cap. Spend. - 3 Yr. Gr. Rate -43.3%
Financial Strength
Quick Ratio NaN
Current Ratio 0
LT Debt to Equity 0%
Total Debt to Equity 0%
Interest Coverage 0
Management Effectiveness
Return On Assets -24.7%
Ret/ On Assets - 3 Yr. Avg. -17.1%
Return On Total Capital -26%
Ret/ On T. Cap. - 3 Yr. Avg. -18%
Return On Equity -26%
Return On Equity - 3 Yr. Avg. -18%
Asset Turnover 0.3
Profitability Ratios
Gross Margin -28.4%
Gross Margin - 3 Yr. Avg. -24%
EBITDA Margin -48.6%
EBITDA Margin - 3 Yr. Avg. -46.8%
Operating Margin -73%
Oper. Margin - 3 Yr. Avg. -74.8%
Pre-Tax Margin -73%
Pre-Tax Margin - 3 Yr. Avg. -73.5%
Net Profit Margin -77%
Net Profit Margin - 3 Yr. Avg. -63.3%
Effective Tax Rate -5.6%
Eff/ Tax Rate - 3 Yr. Avg. 14.9%
Payout Ratio 0%

GEOS stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GEOS stock intrinsic value calculation we used $74 million for the last fiscal year's total revenue generated by Geospace Technologies. The default revenue input number comes from 2017 income statement of Geospace Technologies. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GEOS stock valuation model: a) initial revenue growth rate of 50% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 4.3%, whose default value for GEOS is calculated based on our internal credit rating of Geospace Technologies, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Geospace Technologies.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GEOS stock the variable cost ratio is equal to 83.8%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $68 million in the base year in the intrinsic value calculation for GEOS stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 3.5% for Geospace Technologies.

Corporate tax rate of 27% is the nominal tax rate for Geospace Technologies. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GEOS stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GEOS are equal to 87.8%.

Life of production assets of 3.6 years is the average useful life of capital assets used in Geospace Technologies operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GEOS is equal to 32.4%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $195 million for Geospace Technologies - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 13.21 million for Geospace Technologies is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Geospace Technologies at the current share price and the inputted number of shares is $0.2 billion.

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COMPANY NEWS

▶ Houston oil and gas equipment manufacturer cutting costs, local jobs again   [Dec-27-17 09:30AM  American City Business Journals]
▶ Geospace Technologies Announces Cost Reductions   [Dec-14-17 04:30PM  Business Wire]
▶ Geospace Technologies' Revenue, EPS Losses Climb   [Dec-01-17 02:02PM  Motley Fool]
▶ Geospace Technologies reports 4Q loss   [Nov-30-17 04:39PM  Associated Press]
▶ Geospace Technologies reports 3Q loss   [03:17AM  Associated Press]
▶ Geospace Technologies reports 2Q loss   [05:03AM  Associated Press]
▶ Geospace Technologies reports 1Q loss   [Feb-08-17 04:52PM  Associated Press]
▶ 2 Stocks Below Net Currrent Asset Value   [Dec-17  02:00PM  at Investopedia]
Financial statements of GEOS
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